WASHIINGTON–Student loan subsidies could have dangerous, unintended side-effects according to one new analysis that suggests aspects of President Biden’s debt relief plan could lure unscrupulous schools and unknowing students.
As CUToday.info has reported, the student debt-relief plan introduced by the president cancels up to $20,000 per borrower in federal loans.
“But the more far-reaching — and, over time, more expensive — element of the president’s strategy is his blueprint for a revamped income-linked repayment plan, which would sharply reduce what many borrowers pay every month,” the New York Times reported in its analysis. “It could, however, have unintended consequences. Unscrupulous schools, including for-profit institutions, have long used high-pressure sales tactics, or outright fraud and deception, to saddle students with more debt than they could ever reasonably hope to repay.
By offering more-generous educational subsidies, the government may be creating a perverse incentive for both schools and borrowers, who could begin to pay even less attention to the actual price tag of their education — and taxpayers could be left footing more of the bill, according to the Times.
‘Bearing the Brunt’
“If people are taking out the same or more amount of debt and repaying less of it, then it’s just taxpayers bearing the brunt of it,” said Daniel Zibel, the chief counsel at the National Student Legal Defense Network, an advocacy group, told the Times.
According to the report, experts are particularly concerned about how the new subsidies could be manipulated by for-profit colleges, many of which have a record of persuading people to take on high debt for degrees that often fail to deliver the kind of earnings boost the schools advertise.
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